Fine Gael MEP Gay Mitchell has accused the Government of unnecessarily abandoning plans to grant €170 million in State aid to a new Intel microchip plant at Leixlip, Co Kildare.

Earlier this year, the Government withdrew an application to the European Commission to sanction the grant rather than trigger an inquiry that the commission indicated would lead to the plan's rejection.

Speaking in Strasbourg yesterday following an exchange with the Competition Commissioner, Neelie Kroes, Mr Mitchell said that the commission's objections to the proposal were tentative.

"I think the Government withdrew it prematurely. I think the application has the whiff of a pro forma application about it," he said.

Ms Kroes told Mr Mitchell that the European Commission doubted the Government's aid proposal's compatibility with European Union rules because it would reinforce Intel's dominant position in the European Union microchip market and as a manufacturing plant, would not lead to any technology transfer to Europe.

She added that Leixlip, which has a pro capita income well above the European Union average, would not qualify for regional aid after 2006.

Accusing the Government of "going through the motions" of making the case to Brussels, Mr Mitchell said Ms Kroes did not state explicitly that the application would have been rejected if it was properly considered.

"I felt that the commission's position was really quite tentative. She didn't give a definitive view," he said.

Mr Mitchell added that the commission was in danger of sending out contradictory signals and could be accused of turning down investment while at the same time promoting the Lisbon Agenda which seeks to make Europe the most competitively based region in the world.

At last month's meeting of European Union leaders in Brussels, the Taoiseach called for the EU's state aid rules to be made more compatible with the Lisbon Agenda's emphasis on innovation, job creation and economic growth.